QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March
31, 2012

or

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
to

Commission file number: 000-50129

HUDSON GLOBAL, INC.

(Exact name of registrant as specified
in its charter)

DELAWARE

59-3547281

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

560 Lexington Avenue, New York, New York
10022

(Address of principal executive offices)
(Zip Code)

(212) 351-7300

(Registrant’s telephone number,
including area code)

HUDSON HIGHLAND GROUP, INC.

(Former name)

Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes x
No ¨

Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).Yes
x No ¨

Indicate by check mark whether the Registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of
“large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2
of the Exchange Act.

Large accelerated filer

¨

Accelerated filer

x

Non-accelerated filer

¨

Smaller reporting company

¨

Indicate by checkmark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding
of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

Outstanding on March 31, 2012

Common Stock - $0.001 par value

33,249,192

HUDSON GLOBAL, INC.

INDEX

Page

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) - Three Months Ended March 31, 2012 and 2011

These interim unaudited condensed consolidated
financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”)
for interim financial information and with the instructions to Form 10-Q and should be read in conjunction with the consolidated
financial statements and related notes of Hudson Global, Inc. and its subsidiaries (the “Company”) filed in its Annual
Report on Form 10-K for the year ended December 31, 2011.

The preparation of financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of operating revenues and expenses.
These estimates are based on management’s knowledge and judgments. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation of the Company’s financial position, results
of operations and cash flows at the dates and for the periods presented have been included. The results of operations for interim
periods are not necessarily indicative of the results of operations for the full year. The Condensed Consolidated Financial Statements
include the accounts of the Company and all of its wholly-owned and majority-owned subsidiaries. All significant intra-entity balances
and transactions between and among the Company and its subsidiaries have been eliminated in consolidation.

Certain prior year amounts have been reclassified
to conform to the current period presentation.

NOTE 2 – DESCRIPTION OF BUSINESS

The Company
is comprised of the operations, assets and liabilities of the three Hudson regional businesses of Hudson Americas, Hudson Asia
Pacific, and Hudson Europe (“Hudson regional businesses” or “Hudson”). The Company provides highly
specialized professional-level recruitment and related talent solutions worldwide. The Company’s core service offerings include
Permanent Recruitment, Contract Consulting, Legal eDiscovery, Recruitment Process Outsourcing (“RPO”) and Talent Management
Solutions.

The Company
has operated as an independent publicly-held company since April 1, 2003 when the eResourcing division of Monster Worldwide, Inc.,
formerly TMP Worldwide, Inc., composed of 67 acquisitions made between 1999 and 2001, was spun off. As of March 31, 2012, the Company
had more than 2,000 employees operating in approximately
20 countries with three reportable geographic business segments: Hudson Americas, Hudson Asia Pacific, and Hudson Europe. For the
three months ended March 31, 2012 and 2011, the amounts and percentages of the Company’s gross margins from the three
reportable segments were as follows:

For The Three Months Ended March 31, 2012

For The Three Months Ended March 31, 2011

Gross Margin ($)

%

Gross Margin ($)

%

Hudson Americas

$

11,831

16.16

%

$

10,356

12.75

%

Hudson Asia Pacific

29,313

40.04

%

31,905

39.29

%

Hudson Europe

32,064

43.80

%

38,937

47.96

%

Total

$

73,208

100.00

%

$

81,198

100.00

%

The Company’s core service offerings include those services
described below.

Permanent Recruitment: Offered
on both a retained and contingent basis, Hudson’s Permanent Recruitment services leverage its consultants, psychologists
and other professionals in the development and delivery of its proprietary methods to identify, select and engage the best-fit
talent for critical client roles.

Contract Consulting: In Contract
Consulting, Hudson provides a range of project management, interim management and professional contract staffing services. These
services draw upon a combination of specialized recruiting and project management competencies to deliver a wide range of solutions.
Hudson-employed professionals – either individually or as a team – are placed with client organizations for a defined
period of time based on specific business need.

Legal eDiscovery: Hudson’s
Legal eDiscovery services are composed of eDiscovery solutions, managed document review (encompassing logistical deployment, project
management, process design and productivity management), and contract attorney staffing. The most comprehensive of these is the
Company’s full-service eDiscovery solution, providing an integrated system of discovery management and review technology
deployment for both corporate and law firm clients.

On April 26,
2012, at the annual meeting of Stockholders, the Company received stockholders’ approved to change the Company’s
corporate name to “Hudson Global, Inc.” from “Hudson Highland Group, Inc.” The Company’s name
change became effective on April 26, 2012. The Company also changed its trading symbol on Nasdaq Stock Market to
“HSON” from “HHGP,” effective on April 30, 2012.

Reporting Segments

In the fourth quarter of 2011, the Company
reorganized its leadership team to align the Company’s operations with its business strategy to run its global operations
in three regions. As a result, the Company revised its reportable segments by aggregating the segments of Hudson Australia New
Zealand and Hudson Asia into one segment, Hudson Asia Pacific. The Company has reclassified information for the three months ended
March 31, 2011 to reflect this change to the segment reporting in accordance with the requirements of Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) 280-10-50-1 to 9 “Operating Segments”
andASC 280-10-50-10 “Reportable Segments.” See Note 15 for further details.

Corporate expenses are reported separately
from the three reportable segments and pertain to certain functions, such as executive management, corporate governance, human
resources, accounting, tax and treasury. A portion of these expenses are attributed to the reportable segments for providing the
above services to them and have been allocated to the segments as management service fees and are included
in the segments’ non-operating other income (expense).

NOTE 3 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2011, the FASB issued Accounting
Standards Update (“ASU”) ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”.
This standard requires an entity to present the total of comprehensive income, the components of net income, and the components
of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive
statements. This standard does not change the items that must be reported in other comprehensive income, how such items are measured
or when they must be reclassified to net income. Additionally, the standard does not affect the calculation or reporting of net
income and earnings per share. In December 2011, the FASB issued ASU 2011-12 “Comprehensive Income (Topic 220): Deferral
of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income
in Accounting Standards Update No. 2011-05”. ASU 2011-12 deferred certain aspects of ASU 2011-05. Among the new provisions
in ASU 2011-05 was a requirement for entities to present reclassification adjustments out of accumulated other comprehensive income
by component in both the statement in which net income is presented and the other comprehensive income is presented. This requirement
is indefinitely deferred by ASU 2011-12 and will be further deliberated by the FASB at a future date.The standard is effective for interim and annual periods beginning after December 15, 2011 and should be applied retrospectively.
The Company adopted ASU 2011-05 as of January 1, 2012, and presented the components of other
comprehensive income in a single continuous Condensed Consolidated Statement of Operations and Other Comprehensive Income (loss).
The Company’s adoption of ASU 2011-05 did not have any impact on the Company’s results of operations or financial condition

- 6 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 4 – REVENUE, DIRECT COSTS AND GROSS MARGIN

The Company’s revenue, direct costs
and gross margin were as follows:

For
The Three Months Ended March 31, 2012

For
The Three Months Ended March 31, 2011

Temporary
Contracting

Other

Total

Temporary
Contracting

Other

Total

Revenue

$

150,437

$

50,153

$

200,590

$

163,061

$

55,478

$

218,539

Direct costs (1)

124,071

3,311

127,382

134,155

3,186

137,341

Gross margin

$

26,366

$

46,842

$

73,208

$

28,906

$

52,292

$

81,198

(1)

Direct costs include the direct staffing costs of salaries, payroll taxes, employee benefits, travel expenses and insurance costs for the Company’s contractors and reimbursed out-of-pocket expenses and other direct costs. Other than reimbursed out-of-pocket expenses, there are no other direct costs associated with the Other category, which includes the search, permanent recruitment and other human resource solutions’ revenue. Gross margin represents revenue less direct costs. The region where services are provided, the mix of contracting and permanent recruitment, and the functional nature of the staffing services provided can affect gross margin. The salaries, commissions, payroll taxes and employee benefits related to recruitment professionals are included in selling, general and administrative expenses.

NOTE 5 – STOCK-BASED COMPENSATION

The Company
accounts for stock-based compensation in accordance with ASC 718 "Compensation – Stock Compensation",
as interpreted by the SEC Staff Accounting Bulletins No. 107 and No. 110. Under ASC 718, stock-based compensation is
based on the fair value of the award on the date of grant, which is recognized over the related service period, net of estimated
forfeitures. For awards with graded vesting conditions, the values of the awards are determined by valuing each tranche separately
and expensing each tranche over the required service period. The service period is the period over which the related service is
performed, which is generally the same as the vesting period. The Company uses the Black-Scholes option-pricing model to determine
the compensation expense related to stock options.

Incentive Compensation Plan

The Company
maintains the Hudson Global, Inc. 2009 Incentive Stock and Awards Plan (the “ISAP”) pursuant
to which it can issue equity-based compensation incentives to eligible participants. The ISAP permits the granting of stock options
and restricted stock as well as other types of equity-based awards. The Compensation Committee of the Company’s Board of
Directors (the “Compensation Committee”) will establish such conditions as it deems appropriate on the granting or
vesting of stock options or restricted stock. While the Company historically granted both stock options and restricted stock to
its employees, since 2008 the Company has granted primarily restricted stock to its employees.

The ISAP provides that an aggregate of
1,600,000 shares of the Company’s common stock are reserved for issuance to participants. The Compensation Committee administers
the ISAP and may designate any of the following as a participant under the ISAP: any officer or other employee of the Company or
its affiliates or individuals engaged to become an officer or employee, consultants or other independent contractors who provide
services to the Company or its affiliates and non-employee directors of the Company. As of March 31, 2012, there were no shares
of the Company’s common stock available for future issuance. On April 26, 2012,
the Company’s stockholders approved an amendment to the ISAP to, among other things, increase the number of shares of the
Company’s common stock that are reserved for issuance to participants by 2,500,000 shares.

The Company also maintains the Director
Deferred Share Plan (the “Director Plan”) pursuant to which it can issue restricted stock units to its non-employee
directors. A restricted stock unit is equivalent to one share of the Company’s common stock and
is payable only in common stock issued under the ISAP upon a director ceasing service as a member of the Board of Directors
of the Company.

- 7 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 5 – STOCK-BASED COMPENSATION (continued)

For the three months ended March 31, 2012
and 2011, the Company’s stock-based compensation expense related to stock options, restricted stock and restricted stock
units were as follows:

For The Three Months Ended March 31,

2012

2011

Stock options

$

245

$

82

Restricted stock

625

517

Restricted stock units

51

-

Total

$

921

$

599

Stock
Options

Stock options granted under the ISAP generally
expire ten years after the date of grant and have an exercise price of at least 100% of the fair market value of the underlying
stock on the date of grant and generally vest ratably over a four year period.

As of March
31, 2011, the Company had approximately $900 of unrecognized
stock-based compensation expense related to outstanding non-vested stock options. The Company expects to recognize that cost over
a weighted average service period of approximately 1.7 years.

Changes in the Company’s stock options
for the three months ended March 31, 2012 and 2011 were as follows:

For The Three Months Ended March 31,

2012

2011

Weighted

Weighted

Number of

Average

Number of

Average

Options

Exercise Price

Options

Exercise Price

Outstanding

per Share

Outstanding

per Share

Options outstanding at January 1,

1,396,350

$

11.36

1,548,300

$

12.64

Expired

(10,750

)

15.68

(8,625

)

16.59

Options outstanding at March 31,

1,385,600

11.33

1,539,675

12.62

Options exercisable at March 31,

973,100

$

13.94

1,057,425

$

12.73

Restricted Stock

A summary of the quantity and vesting conditions
for shares of restricted stock granted for the three months ended March 31, 2012 was as follows:

Number of

Shares of

Restricted

Vesting conditions

Stock Granted

Performance and service conditions (1)

562,830

Vest 50% on each of the second and third anniversaries of the grant date with service conditions only

30,000

Vest one-third on each of the first three anniversaries of the grant date with service conditions only

15,000

Total shares of restricted stock granted for the three months ended March 31, 2012

607,830

- 8 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 5 – STOCK-BASED COMPENSATION (continued)

(1) The performance conditions
with respect to the restricted stock may be satisfied as follows:

(a) 50% of the shares of restricted
stock may be earned on the basis of performance as measured by a “Take-out Ratio,” defined as the percentage of the
direct, front line costs incurred for the year ending December 31, 2012 divided by the gross margin for the year ending December
31, 2012;

(b) 25% of the shares of restricted
stock may be earned on the basis of performance as measured by an employee engagement score for the year ending December 31, 2012
based on an employee survey to be conducted by a global human resources consulting firm;

(c) 25% of the shares of restricted
stock may be earned on the basis of performance as measured by “Cash Efficiency,” defined as (1) cash flow from operations
for the year ending December 31, 2012 divided by (2) gross margin minus selling, general and administrative expenses for the year
ending December 31, 2012.

To the extent shares are earned on the basis of performance,
such shares will vest on the basis of service as follows:

(a) 33% of the shares vest
on the later of the first anniversary of the grant date or the determination that the performance conditions have been satisfied;

(b) 33% of the shares vest
on the second anniversary of the grant date;

(c) 34% of the shares vest
on the third anniversary of the grant date; provided that, in each case, the named executive officer remains employed by the Company
from the grant date through the applicable service vesting date.

As of March
31, 2012, the Company had approximately $4,279 of
unrecognized stock-based compensation expense related to outstanding non-vested restricted stock. The Company expects to recognize
that cost over a weighted average service period of 1.8
years.

Changes in the Company’s restricted
stock for the three months ended March 31, 2012 and 2011were as follows:

For The Three Months Ended March 31,

2012

2011

Number of

Weighted

Number of

Weighted

Shares of

Average

Shares of

Average

Restricted

Grant Date

Restricted

Grant Date

Stock

Fair Value

Stock

Fair Value

Non-vested restricted stock at January 1,

1,166,082

$

5.12

953,037

$

3.64

Granted

607,830

4.59

640,125

6.36

Vested

(366,299

)

5.04

(216,189

)

3.43

Forfeited

(100,347

)

5.61

(69,819

)

2.41

Non-vested restricted stock at March 31,

1,307,266

$

4.86

1,307,154

$

5.07

- 9 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 5 – STOCK-BASED COMPENSATION (continued)

Restricted Stock Units

As of March
31, 2012, the Company had approximately $336 of unrecognized
stock-based compensation expense related to outstanding non-vested restricted stock units. The Company expects to recognize that
cost over a weighted average service period of 2.0 years.

Changes in the Company’s restricted
stock units for the three months ended March 31, 2012 and 2011were as follows:

The Company maintains the Hudson Global,
Inc. 401(k) Savings Plan (the “401(k) plan”). The 401(k) plan allows eligible employees to contribute up to 15% of
their earnings to the 401(k) plan. The Company has the discretion to match employees’ contributions up to 3% through a contribution
of the Company’s common stock. Vesting of the Company’s contribution occurs over a five-year period. For the three
months ended March 31, 2012 and 2011, the Company’s expenses and contributions to satisfy the prior years’ employer-matching
liability for the 401(k) plan were as follows:

For The Three Months Ended March 31,

(in thousands, except otherwise stated)

2012

2011

Expense recognized for the 401(k) plan

$

193

$

205

Contributions to satisify prior years' employer-matching liability

Number of shares of the Company's common stock issued

124,404

91,944

Market value per share of the Company's common stock on contribition date (in dollars)

$

5.35

$

6.55

Non-cash contribution made for employer matching liability

$

666

$

602

NOTE 6 – INCOME TAXES

Under ASC 270, “Interim Reporting”,
and ASC 740-270, “Income Taxes – Intra Tax Allocation”, the Company is required to adjust its effective
tax rate for each quarter to be consistent with the estimated annual effective tax rate. Jurisdictions with a projected loss for
the full year where no tax benefit can be recognized are excluded from the calculation of the estimated annual effective tax rate.
Applying the provisions of ASC 270 and ASC 740-270 could result in a higher or lower effective rate during a particular quarter,
based upon the mix and timing of actual earnings versus annual projections.

Effective Tax Rate

The benefit
from income taxes for the three months ended March 31, 2012 was $646 on a pre-tax loss of $3,867,
compared with a provision for income taxes of $750 on a pre-tax income of $744 for
the same period in 2011. The Company’s effective income tax rate was 16.7% and 100.8% for the three months ended March 31,
2012 and 2011, respectively. The change in the rate was primarily attributable to the Company’s ability to benefit losses
in certain foreign jurisdictions in 2012 that it was previously unable to recognize and also to the lower charges related to uncertain
tax positions.

- 10 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 6 – INCOME TAXES (continued)

Uncertain Tax Positions

As of March
31, 2012 and December 31, 2011, the Company had $7,737 and
$7,807, respectively, of unrecognized tax benefits, including interest and penalties, which if recognized in the future, would
lower the Company’s annual effective income tax rate. Accrued interest and penalties were $1,554 and
$1,644 as of March 31, 2012 and December 31, 2011, respectively. Estimated interest and penalties are classified as part of
the provision for income taxes in the Company’s Condensed Consolidated Statements of Operations and totaled to a benefit
of $97 and $148 for the three months ended March 31,
2012 and 2011, respectively.

In
many cases, the Company’s unrecognized tax benefits are related to tax years that remain subject to examination by
the relevant tax authorities. Tax years with net operating losses remain open until the losses expire or the statutes
of limitations for those years when the losses are used expire. The open tax years are 2008 through 2011 for the U.S. Federal
and 2005 through 2011 for most state and local jurisdictions, 2010 through 2011 for the U.K., 2007 through 2011 for Australia
and 2005 through 2011 for most other jurisdictions. The Company is currently under income tax examination in the State
of Pennsylvania (2004-2009), Illinois (2008-2009) and New Zealand (2009). The Company believes that its tax reserves
are adequate for all years subject to examination.

Based on information
available as of March 31, 2012, it is reasonably possible that the total amount of unrecognized tax benefits could decrease in
a range of $500 to $4,300 within 12 months as a result
of projected resolutions of global tax examinations and controversies and potential lapses of the applicable statutes of limitations.

NOTE 7 – EARNINGS (LOSS) PER SHARE

Basic earnings
(loss) per share (“EPS”) are computed by dividing the Company’s net income (loss) by the weighted average number
of shares outstanding during the period. When the effects are not anti-dilutive, diluted earnings (loss) per share are computed
by dividing the Company’s net income (loss) by the weighted average number of shares outstanding and the impact of all dilutive
potential common shares, primarily stock options “in-the-money” and unvested restricted stock. The dilutive impact
of stock options and unvested restricted stock is determined by applying the “treasury stock” method. Performance-based
restricted stock awards are included in the computation of diluted earnings per share only to
the extent that the underlying performance conditions: (i) are satisfied prior to the end of the reporting period, or (ii) would
be satisfied if the end of the reporting period were the end of the related contingency period and the result would be dilutive
under the treasury stock method. Stock awards subject to vesting or exercisability based on the achievement
of market conditions are included in the computation of diluted earnings per share only when
the target stock price is met.

A reconciliation
of the numerators and denominators of the basic and diluted earnings (loss) per share calculations were as follows:

Three Months Ended March 31,

2012

2011

Earnings (loss) per share ("EPS"):

Basic

$

(0.10

)

$

(0.00

)

Diluted

$

(0.10

)

$

(0.00

)

EPS numerator - basic and diluted:

Net income (loss)

$

(3,221

)

$

(6

)

EPS denominator:

Weighted-average common stock outstanding - basic

31,765,239

31,325,021

Common stock equivalents: stock options and other stock-based awards (a)

-

-

Weighted-average number of common stock outstanding - diluted

31,765,239

31,325,021

- 11 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 7 – EARNINGS (LOSS) PER SHARE (continued)

(a)

For the periods in which net losses are presented, the diluted weighted average number of shares of common stock outstanding
did not differ from the basic weighted average number of shares of common stock outstanding because the effects of any potential
common stock equivalents (see Note 5 for further details on outstanding stock options, non-vested restricted stock units and non-vested
restricted stock) were anti-dilutive and therefore not included in the calculation of the denominator of dilutive earnings per
share.

The weighted average number of shares outstanding
used in the computation of diluted net income (loss) per share for the three months ended March 31, 2012 and 2011 did not include
the effect of the following potentially outstanding shares of common stock because the effect would have been anti-dilutive:

Three Months Ended March 31,

2012

2011

Unvested restricted stock

1,307,266

1,388,714

Unvested restricted stock units

100,000

-

Stock options

1,385,600

1,539,675

Total

2,792,866

2,928,389

NOTE 8 – RESTRICTED CASH

A summary of the Company’s restricted
cash included in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011 were as follows:

March 31,

December 31,

2012

2011

Included under the caption "Other assets":

Collateral accounts

$

1,311

$

3,120

Rental deposits

277

268

Total amount under the caption "Other assets":

$

1,588

$

3,388

Included under the caption "Prepaid and other":

Social tax payment reserves

$

1

$

3

Rental deposits

17

-

Client guarantees

121

$

133

Collateral accounts

122

117

Total amount under the caption "Prepaid and other"

$

261

$

253

Total restricted cash

$

1,849

$

3,641

Collateral accounts primarily included
deposits held under a collateral trust agreement, which supports the Company’s workers’ compensation policy. The rental
deposits with banks were held as guarantees for the rent on the Company’s offices in the Netherlands and Spain. Social tax
payment reserves were held with banks for employee social tax payments required by law in the Netherlands. The client guarantees
were held in banks in Belgium as deposits for various client projects.

- 12 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 9 – PROPERTY AND EQUIPMENT, NET

As of March 31, 2012 and December 31,
2011, property and equipment, net were as follows:

March 31,

December 31,

2012

2011

Computer equipment

$

13,260

$

13,666

Furniture and equipment

9,938

9,692

Capitalized software costs

32,660

30,920

Leasehold and building improvements

22,106

21,650

77,964

75,928

Less: accumulated depreciation and amortization

59,964

58,090

Property and equipment, net

$

18,000

$

17,838

The Company had expenditures of approximately
$831 and $1,137 for acquired property and equipment, mainly consisting of software development, fixtures, computer equipment and
leasehold improvements, which had not been placed in service as of March 31, 2012 and December 31, 2011, respectively. Depreciation
expense is not recorded for such assets until they are placed in service.

Non-Cash Capital Expenditures

The Company acquired certain computer equipment
under capital lease agreements. The current portion of the capital lease obligations are included under the caption “Accrued
expense and other current liabilities” in the Condensed Consolidated Balance Sheets and the non-current portion of the capital
lease obligations are included under the caption “Other non-current liabilities” in the Condensed Consolidated Balance
Sheets as of March 31, 2012 and December 31, 2011. A summary of the Company’s equipment acquired under capital lease agreements
were as follows:

March 31,

December 31,

2012

2011

Capital lease obligation, current

$

427

$

420

Capital lease obligation, non-current

$

610

$

720

The Company did not acquire any property
and equipment under capital lease agreements for the three months ended March 31, 2012 and 2011.

NOTE 10 – GOODWILL

The following
is a summary of the changes in the carrying value of the Company’s goodwill for the three months ended March 31, 2012 and
2011. The goodwill related to the earn-out payment made in 2010 for the Company’s 2007 acquisition of the businesses
of Tong Zhi (Beijing) Consulting Service Ltd and Guangzhou Dong Li Consulting Service Ltd.

Carrying Value

2012

2011

Goodwill, January 1,

$

1,992

$

1,909

Additions

-

-

Impairments

-

-

Currency translation

6

13

Goodwill, March 31,

$

1,998

$

1,922

- 13 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 11 – BUSINESS REORGANIZATION EXPENSES

In January 2012, the
Company’s Chief Executive Officer approved a $1,000 plan of reorganization (“2012 Plan”) to streamline the
Company’s support operations in each of Hudson’s regional businesses to match the aggregated operating segments
and to improve support services to the Company’s regional and global professional business practices. The 2012 Plan
primarily includes costs for actions to reduce support functions to match them to the revised operating structure. On April
26, 2012, the Company’s Board of Directors (the “Board”) approved an addition to the 2012 Plan of $10,000 for additional actions to accelerate the Company’s plans for increased global alignment and
redirection of resources from support to client facing activities. The Company expects to substantially complete the 2012
Plan in 2012.

The Company’s Board approved other
reorganization plans in 2009 (“2009 Plan”), 2008 (“2008 Plan”), and 2006 (“2006 Plan”) to streamline
the Company’s support operations and included actions to reduce support functions to match them to the scale of the business,
to exit underutilized properties and to eliminate contracts for certain discontinued services. These actions resulted in costs
for lease termination payments, employee termination benefits and contract cancellations. Business reorganization expense for the
three months ended March 31, 2012, and 2011 by plan was as follows:

Three Months Ended March 31,

2012

2011

2006 Plan

$

-

$

375

2008 Plan

-

-

2009 Plan

(48

)

(24

)

2012 Plan

988

-

Total

$

940

$

351

The following table contains amounts for
Changes in Estimate, Additional Charges, and Payments related to prior restructuring plans that were incurred or recovered during
the three months ended March 31, 2012. The amounts for Changes in Estimate and Additional Charges are classified as business reorganization
expenses in the Company’s Condensed Consolidated Statements of Operations. Amounts in the “Payments” column represent
primarily the cash payments associated with the reorganization plans. Changes in the accrued business reorganization expenses for
the three months ended March 31, 2012 were as follows:

For the Three Months Ended March 31, 2012

December 31, 2011

Changes in Estimate

Additional Charges

Payments

March 31, 2012

Lease termination payments

$

1,309

$

(49

)

$

-

$

(85

)

$

1,175

Employee termination benefits

75

-

989

(1,051

)

13

Contract cancellation costs

5

-

-

-

5

Total

$

1,389

$

(49

)

$

989

$

(1,136

)

$

1,193

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Consulting, Employment and Non-compete Agreements

The Company has entered into various consulting,
employment and non-compete agreements with certain key management personnel and former owners of acquired businesses. Agreements
with key members of management are generally one year in length, on an at-will basis, provide for compensation and severance payments
under certain circumstances and are automatically renewed annually unless either party gives sufficient notice of termination.
Agreements with certain consultants and former owners of acquired businesses are generally two to five years in length.

- 14 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 12 – COMMITMENTS AND CONTINGENCIES (continued)

Litigation and Complaints

The Company is subject, from time to time,
to various claims, lawsuits, and other complaints from, for example, clients, candidates, suppliers, landlords, regulators or tax
authorities arising in the ordinary course of business. The Company routinely monitors claims such as these, and records provisions
for losses when the claim becomes probable and the amount due is estimable. Although the outcome of these claims cannot be determined,
the Company believes that the final resolution of these matters will not have a material adverse effect on the Company’s
financial condition, results of operations or liquidity.

For matters that have reached the threshold
of probable and estimable, the Company has established reserves for legal, regulatory and other contingent liabilities. The Company’s
reserves were not significant as of March 31, 2012 and December 31, 2011.

Asset Retirement Obligations

The Company has certain asset retirement
obligations that are primarily the result of legal obligations for the removal of leasehold improvements and restoration of premises
to their original condition upon termination of leases. The current portion of asset retirement obligations were included under
the caption “Accrued expense and other current liabilities” in the Condensed Consolidated Balance Sheets. The non-current
portion of asset retirement obligations were included under the caption “Other non-current liabilities” in the Condensed
Consolidated Balance Sheets. The Company’s asset retirement obligations that were included in the Condensed Consolidated
Balance Sheets as of March 31, 2012 and December 31, 2011 were as follows:

March 31, 2012

December 31, 2011

Current portion of asset retirement obligations

$

533

$

301

Non-current portion of asset retirement obligations

2,460

2,507

Total asset retirement obligations

$

2,993

$

2,808

Matters Under Appeal

The
Company is currently appealing a decision by the Pennsylvania Department of Revenue related to its 2004 and 2005 state income tax
returns. Under the appeals process, the State has filed a routine tax lien in the amount of $3,500 on the Company’s U.S.
operating subsidiary. The Company has posted a security bond amounting to 120% of the lien. The Company does not expect this
bond to be drawn. In January 2012, the Company and the Commonwealth of Pennsylvania engaged in discussions resulting in a settlement
proposal that is currently pending. This proposal could potentially lead to a settlement within the next twelve months. A settlement
could result in a reduction in the future provision for income taxes.

- 15 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 13 – CREDIT AGREEMENTS

Credit Agreement with RBS Citizens Business Capital

On August 5, 2010, the Company and certain
of its North American and U.K. subsidiaries entered into a senior secured revolving credit facility with RBS Citizens Business
Capital, a division of RBS Asset Finance, Inc. (“RBS”), and on February 22, 2012, the Company and certain of its North
American and U.K. subsidiaries entered into an amendment to the senior secured revolving credit facility with RBS (as amended,
the “Revolver Agreement”). The Revolver Agreement provides the Company with the ability to borrow up to $40,000, including
the issuance of letters of credit. The Company may increase the maximum borrowing amount to $50,000, subject to certain conditions
including lender acceptance. Extensions of credit are based on a percentage of the eligible accounts receivable from the U.K. and
North America operations, less required reserves. In connection with the Revolver Agreement, the Company incurred and capitalized
approximately $1,457 of deferred financing costs, which are being amortized over the term of the agreement. The maturity date of
the Revolver Agreement is August 5, 2014. Borrowings under the Revolver Agreement are secured by substantially all of the assets
of the Company.

Prior to the amendment, borrowings could
be made with an interest rate based on a base rate plus 2% or on the LIBOR rate for the applicable period plus 3%. The applicable
margin for each rate is based on the Company’s Fixed Charge Coverage Ratio (as defined in the Revolver Agreement). The amendment,
which was deemed to be effective on February 1, 2012, lowered the applicable margin for the interest rate on borrowings based on
the Company’s Fixed Charge Coverage Ratio as follows:

Level

Fixed Charge Coverage Ratio

Base Rate Revolving Loans

LIBOR Revolving Loans or Letter of Credit Obligations

I

Greater than or equal to 1.25:1.0

1.25

%

2.25

%

II

Less than 1.25:1.0 but greater than or equal to 1.10:1.0

1.50

%

2.50

%

III

Less than 1.10:1.0

1.75

%

2.75

%

The details of the Revolver Agreement as
of March 31, 2012 were as follows:

March 31, 2012

Borrowing base

$

34,646

Less: adjustments to the borrrowing base

Minimum availability

(5,000

)

Outstanding letters of credits

(2,360

)

Adjusted borrowing base

27,286

Less: outstanding borrowing

-

Additional borrowing availability

$

27,286

Interest rates on outstanding borrowing

4.50

%

The Revolver Agreement contains various
restrictions and covenants including: (1) a requirement to maintain a minimum excess availability $5,000, a Fixed Charge Coverage
Ratio of at least 1.1x and EBITDA (as defined in the Revolver Agreement) for the Company’s North American and U.K. operations
of at least $1,000; (2) a limit on the payment of dividends of not more than $5,000 per year and subject to certain conditions;
(3) restrictions on the ability of the Company to make additional borrowings, acquire, merge or otherwise fundamentally change
the ownership of the Company or repurchase the Company’s stock; (4) a limit on investments, and a limit on acquisitions of
not more than $25,000 in cash and $25,000 in non-cash consideration per year, subject to certain conditions set forth in the Revolver
Agreement; and (5) a limit on dispositions of assets of not more than $4,000 per year. The Company was in compliance with all financial
covenants under the Revolver Agreement as of March 31, 2012.

- 16 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 13 – CREDIT AGREEMENTS (continued)

Credit Agreement with Westpac Banking Corporation

On November 29, 2011, certain Australian
and New Zealand subsidiaries of the Company entered into a Facility Agreement, dated November 29, 2011 (the “Facility Agreement”),
with Westpac Banking Corporation and Westpac New Zealand Limited (collectively, “Westpac”).

The Facility Agreement provides three tranches:
(a) an invoice discounting facility of up to $20,706 (AUD20,000) (“Tranche A”) for an Australian subsidiary of the
Company, which is based on an agreed percentage of eligible accounts receivable; (b) an overdraft facility of up to $2,865 (NZD3,500)
(“Tranche B”) for a New Zealand subsidiary of the Company; and (c) a financial guarantee facility of up to $5,177 (AUD5,000)
(“Tranche C”) for the Australian subsidiary.

The Facility Agreement does not have a
stated maturity date and can be terminated by Westpac upon 90 days written notice. Borrowings under Tranche A may be made with
an interest rate based on the Invoice Finance 30-day Bank Bill Rate (as defined in the Facility Agreement) plus a margin of 0.75%.
Borrowings under Tranche B may be made with an interest rate based on the Commercial Lending Rate (as defined in the Facility Agreement)
plus a margin of 0.83%. Each of Tranche A and Tranche B bears a fee, payable monthly, equal to 0.65% of the size of Westpac’s
commitment under such tranche. Borrowings under Tranche C may be made incurring a fee equal to 1.10% of the face value of the financial
guarantee requested. Amounts owing under the Facility Agreement are secured by substantially all of the assets of the Australian
subsidiary, its Australian parent company and the New Zealand subsidiary (collectively, the “Obligors”) and certain
of their subsidiaries.

The details of the Facility Agreement as
of March 31, 2012 were as follows:

March 31, 2012

Tranche A:

Borrowing capacity

$

20,706

Less: outstanding borrowing

-

Additional borrowing availability

$

20,706

Interest rates on outstanding borrowing

6.15

%

Tranche B:

Borrowing capacity

$

2,865

Less: outstanding borrowing

-

Additional borrowing availability

$

2,865

Interest rates on outstanding borrowing

6.03

%

Tranche C:

Financial guarantee capacity

$

5,177

Less: outstanding financial guarantee requested

(4,462

)

Additional availability for financial guarantee

$

715

Interest rates on financial guarantee requested

1.10

%

The Facility Agreement contains various
restrictions and covenants applicable to the Obligors and certain of their subsidiaries, including (a) a requirement that the Obligors
maintain (1) a minimum Tangible Net Worth (as defined in the Facility Agreement) as of the last day of each calendar quarter of
not less than the higher of 85% of the Tangible Net Worth as of the last day of the previous calendar year and $18,118 (AUD17,500);
(2) at all times, a minimum Fixed Charge Coverage Ratio (as defined in the Facility Agreement) of 1.5x for the trailing twelve
month period; and (3) a maximum Borrowing Base Ratio (as defined in the Facility Agreement) as of the last day of each calendar
quarter of not more than 0.8; and (b) a limitation on certain intercompany payments with permitted payments outside the Obligor
group restricted to a defined amount derived from the net profits of the Obligors and their subsidiaries. The Company was in compliance
with all financial covenants under the Facility Agreement as of March 31, 2012.

- 17 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 13 – CREDIT AGREEMENTS (continued)

Other Credit Agreements

The Company also has lending arrangements
with local banks through its subsidiaries in the Netherlands, Belgium, Singapore and Mainland China. As of March 31, 2012, the
Netherlands subsidiary could borrow up to $2,067 (€1,549) based on an agreed percentage
of accounts receivable related to its operations. The Belgium subsidiary has a $1,334 (€1,000) overdraft
facility. Borrowings under the Belgium and the Netherlands lending arrangements may be made with an interest rate based on the
one month EURIBOR plus a margin, and were 3.06% as of March 31, 2012. The lending arrangement
in the Netherlands expires annually each June, but can be renewed for one year periods at that time. The lending arrangement in
Belgium has no expiration date and can be terminated with a 15 day notice period. In Singapore, the Company’s subsidiary
can borrow up to $795 (SGD 1,000) for working capital purposes. Interest on borrowings under this overdraft facility is based on
the Singapore Prime Rate plus a margin of 1.75%, and it was 6.0% on March 31, 2012.
The Singapore overdraft facility expires annually each August, but can be renewed for one year periods at that time. In Mainland
China, the Company’s subsidiary can borrow up to $1,000 for working capital purposes. Interest on borrowings under this overdraft
facility is based on the People’s Republic of China’s six month rate plus 200 basis points, and it was 8.1% on
March 31, 2012. This overdraft facility expires annually each September, but can be renewed for one year periods at that time.
There were no outstanding borrowings under the Belgium, the Netherlands, Singapore and Mainland China lending agreements as of
March 31, 2012.

The average monthly outstanding borrowings
for the Revolver Agreement, Facility Agreement and the various credit agreements in Belgium, the Netherlands, Singapore and Mainland
China was $1,260 for the three months ended March 31, 2012. The weighted average interest
rate on all outstanding borrowings for the three months ended March 31, 2012 was 5.92%.

The Company continues to use the aforementioned
credit to support its ongoing global working capital requirements, capital expenditures and other corporate purposes and to support
letters of credit. Letters of credit and bank guarantees are used primarily to support office leases.

NOTE 14 – SHELF REGISTRATIONS

Acquisition Shelf Registration Statement

The Company has a shelf registration on
file with the SEC to enable it to issue up to 1,350,000 shares of its common stock from time to time in connection with acquisitions
of businesses, assets or securities of other companies, whether by purchase, merger or any other form of acquisition or business
combination. If any shares are issued using this shelf registration, the Company will not receive any proceeds from these offerings
other than the assets, businesses or securities acquired. As of March 31, 2012, all of the 1,350,000 shares were available for
issuance.

Shelf Registration and Common Stock Offering

In December 2009, the Company filed a shelf
registration statement (the “2009 Shelf Registration”) with the SEC to enable it to issue up to $30,000 equivalent
of securities or combinations of securities. The types of securities permitted for issuance under the 2009 Shelf Registration are
debt securities, common stock, preferred stock, warrants, stock purchase contracts and stock purchase units.

As a result of a 2010 public offering of
common stock, the Company may issue up to $8,990 equivalent of securities or combinations of securities under the 2009 Shelf Registration.

- 18 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 15 – SEGMENT AND GEOGRAPHIC DATA

Segment Reporting

In the fourth quarter of 2011, the Company
reorganized its leadership team to align the Company’s operations with its business strategy to run its global operations
in three regions. As a result, the Company revised its reportable segments by aggregating the segments of Hudson Australia New
Zealand and Hudson Asia into one segment, Hudson Asia Pacific. The Company has reclassified information for the three months ended
March 31, 2011 to reflect this change to the segment reporting in accordance with the requirements of ASC 280-10-50-1 to 9 “Operating
Segments” andASC 280-10-50-10 “Reportable Segments.”

The Company operates in three reportable
segments: the Hudson regional businesses of Hudson Americas, Hudson Asia Pacific, and Hudson Europe. Corporate expenses are reported
separately from the three reportable segments and pertain to certain functions, such as executive management, corporate governance,
human resources, accounting, administration, tax and treasury, the majority of which are attributable to and have been allocated
to the reportable segments. Segment information is presented in accordance with ASC 280, “Segments Reporting.”
This standard is based on a management approach that requires segmentation based upon the Company’s internal organization
and disclosure of revenue and certain expenses based upon internal accounting methods. The Company’s financial reporting
systems present various data for management to run the business, including internal profit and loss statements prepared on a basis
not consistent with generally accepted accounting principles. Accounts receivable, net and long-lived assets are the only significant
assets separated by segment for internal reporting purposes.

Hudson
Americas

Hudson
Asia Pacific

Hudson
Europe

Corporate

Inter-
segment elimination

Total

For The Three Months Ended March 31,
2012

Revenue, from external customers

$

45,170

$

74,263

$

81,157

$

-

$

-

$

200,590

Inter-segment revenue

-

13

18

-

(31

)

-

Total revenue

$

45,170

$

74,276

$

81,175

$

-

$

(31

)

$

200,590

Gross margin, from external customers

$

11,831

$

29,313

$

32,064

$

-

$

-

$

73,208

Inter-segment gross margin

(3

)

(4

)

7

-

-

-

Total gross margin

$

11,828

$

29,309

$

32,071

$

-

$

-

$

73,208

Business reorganization expenses (recovery)

$

20

$

67

$

720

$

133

$

-

$

940

EBITDA (loss) (a)

$

(491

)

$

8

$

(1,087

)

$

(631

)

$

-

$

(2,201

)

Depreciation and amortization

319

694

363

129

-

1,505

Intercompany interest income (expense), net

-

(1,746

)

(108

)

1,854

-

-

Interest income (expense), net

(19

)

(65

)

19

(96

)

-

(161

)

Income (loss) from continuing operations before
income taxes

$

(829

)

$

(2,497

)

$

(1,539

)

$

998

$

-

$

(3,867

)

As of March 31, 2012

Accounts receivable, net

$

31,654

$

45,098

$

55,815

$

-

$

-

$

132,567

Long-lived assets, net of accumulated depreciation
and amortization

$

2,478

$

10,389

$

4,902

$

2,406

$

-

$

20,175

Total assets

$

36,997

$

75,506

$

84,660

$

8,614

$

-

$

205,777

Hudson
Americas

Hudson
Asia Pacific

Hudson
Europe

Corporate

Inter-
segment elimination

Total

For The Three Months Ended March 31,
2011

Revenue, from external customers

$

45,812

$

79,017

$

93,710

$

-

$

-

$

218,539

Inter-segment revenue

(2

)

5

9

-

(12

)

-

Total revenue

$

45,810

$

79,022

$

93,719

$

-

$

(12

)

$

218,539

Gross margin, from external customers

$

10,356

$

31,905

$

38,937

$

-

$

-

$

81,198

Inter-segment gross margin

(3

)

(2

)

4

-

1

-

Total gross margin

$

10,353

$

31,903

$

38,941

$

-

$

1

$

81,198

Business reorganization expenses (recovery)

$

-

$

-

$

351

$

-

$

-

$

351

EBITDA (loss) (a)

$

(379

)

$

2,014

$

2,175

$

(1,284

)

$

-

$

2,526

Depreciation and amortization

322

720

466

68

-

1,576

Intercompany interest income (expense), net

-

(1,792

)

(109

)

1,901

-

-

Interest (expense) income , net

(1

)

(104

)

6

(107

)

-

(206

)

Income (loss) from continuing operations
before income taxes

$

(702

)

$

(602

)

$

1,606

$

442

$

-

$

744

As of March 31, 2011

Accounts receivable, net

$

28,608

$

50,341

$

66,556

$

-

$

-

$

145,505

Long-lived assets, net of accumulated depreciation
and amortization

$

1,537

$

9,935

$

4,736

$

2,141

$

-

$

18,349

Total assets

$

32,733

$

79,616

$

100,384

$

9,665

$

-

$

222,398

- 19 -

HUDSON GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

(in thousands, except share and per share
amounts)

(unaudited)

NOTE 15 – SEGMENT AND GEOGRAPHIC DATA (continued)

(a)

SEC Regulation S-K 229.10(e)1(ii)(A) defines EBITDA as earnings before interest, taxes, depreciation and amortization. EBITDA is presented to provide additional information to investors about the Company’s operations on a basis consistent with the measures which the Company uses to manage its operations and evaluate its performance. Management also uses this measurement to evaluate working capital requirements. EBITDA should not be considered in isolation or as a substitute for operating income and net income prepared in accordance with U.S. GAAP or as a measure of the Company’s profitability.

Geographic Data Reporting

A summary of revenues for the three months
ended March 31, 2012 and 2001 and long-lived assets and net assets by geographic area as of March 31, 2012 and 2001 were as follows:

Revenue by geographic region disclosed above is net of any inter-segment revenue and, therefore, represents only revenue from
external customers according to the location of the operating subsidiary.

(c)

Comprised of property and equipment and intangibles. Corporate assets are included in the United States.

- 20 -

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and
Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Condensed
Consolidated Financial Statements and the notes thereto, included in Item 1 of this Form 10-Q. This MD&A contains forward-looking
statements. Please see “FORWARD-LOOKING STATEMENTS” for a discussion of the uncertainties, risks and assumptions associated
with these statements. This MD&A also uses the non-generally accepted accounting principle measure of earnings before interest,
taxes, depreciation and amortization (“EBITDA”). See Note 15 to the Condensed Consolidated Financial Statements for
EBITDA segment reconciliation information.

This MD&A includes the following sections:

·

Executive Overview

·

Results of Operations

·

Liquidity and Capital Resources

·

Contingencies

·

Recent Accounting Pronouncements

Executive Overview

The Company has expertise in recruiting
mid-level professional talent across all management disciplines in a wide range of industries. We match clients and candidates
to address client needs on a part time, full time, and interim basis. Part of that expertise is derived from research on hiring
trends and clients’ current successes and challenges with their staff. This research has helped enhance our understanding
about the number of new hires that do not meet our clients’ long term goals, the reasons why, and the cost to organizations.
Our focus is to continually upgrade our service offerings, delivery capability and assessment tools to make our candidates more
successful in achieving our clients’ business requirements.

Over the past year, the Company has shifted
and refined its focus from a traditional staffing vendor to providing solutions as a trusted business advisor and partner to both
clients and candidates. The Company’s proprietary frameworks, assessment tools and leadership development programs, coupled
with our broad geographical footprint, has allowed us to design and implement regional and global recruitment solutions that greatly
enhance the quality of hiring.

The Company’s strategic initiatives
for the near term include:

·

Leveraging the value of our global business as exemplified by the launch of the global practices in Legal eDiscovery and Recruitment
Process Outsourcing (“RPO”).

·

Attracting, developing and retaining the right people to increase productivity and profitability.

·

Focusing on selected clients and services to provide higher value recruitment solutions to their businesses.

·

Create a compelling digital presence to help attract both highly skilled candidates and new clients to grow our business.

- 21 -

Current Market Conditions

Global market conditions were mixed throughout
the first quarter. The European debt crisis, which intensified in 2011, has persisted longer than anticipated despite government
and central bank actions and has had an impact on the banking sector worldwide. In addition, slowing growth in China and its impact
throughout the greater Asia Pacific region has resulted in overall delays in corporate hiring.

These market conditions contributed to
a decline in the Company’s first quarter revenues of 8.9 percent and affected several of the major markets in which we operate.
If the debt crisis in Europe is not resolved timely, we may experience prolonged periods of lower revenues, which could negatively
impact our business, operating results and financial condition. At this time we are unable to accurately predict the outcome of
these events or changes in general economic conditions and their effect on the demand for our services.

In January 2012, the Company’s
Chief Executive Officer approved a $1 million plan of reorganization (“2012 Plan”) to streamline the
Company’s support operations in each of Hudson’s regional businesses to match the aggregated operating segments
and to improve support services to the Company’s regional and global professional business practices. The 2012 Plan
primarily includes costs for actions to reduce support functions to match them to the revised operating structure. On April
26, 2012, the Company’s Board of Directors approved an addition to the 2012 Plan of up to $10 million for additional
actions to accelerate the Company’s plans for increased global alignment and redirection of resources from support to
client facing activities. The Company expects to substantially complete the 2012 Plan in 2012.

Financial Performance

The following is a summary of the highlights
for the three months ended March 31, 2012, and 2011. These should be considered in the context of the additional disclosures in
this MD&A.

•

Revenue was $200.6 million for the three months ended March 31, 2012, compared to $218.5 million for 2011, a decrease
of $17.9 million, or 8.2%. On a constant currency basis, the Company’s revenue decreased $19.5 million or 8.9%. Of
this decrease, $14.1 million, or 8.6% was in contracting revenue and $5.9 million, or 13.5%, was in permanent recruitment revenue.

•

Gross margin was $73.2 million for the three months ended March 31, 2012, compared to $81.2 million for 2011, a decrease
of $8.0 million, or 9.8%. On a constant currency basis, gross margin decreased $8.2 million or 10.1%. Of
this decrease, $5.9 million, or 13.5 % was in permanent recruitment gross margin and $2.7 million, or 9.3% was
in contracting gross margin.

•

Selling, general and administrative expenses and other non-operating income (expense) (“SG&A and Non-Op”) were
$74.5 million for the three months ended March 31, 2012, as compared to $78.3 million for 2011, a decrease of $3.9 million, or
4.9%. On a constant currency basis, SG&A and Non-Op decreased $4.1 million or 5.2%. SG&A and Non-Op, as a percentage
of revenue, was 37.1% for the three months ended March 31, 2012 as compared to 35.7% in 2011.

•

EBITDA loss was $2.2 million for the three months ended March 31, 2012, as compared to EBITDA of $2.5 million for 2011. On
a constant currency basis, EBITDA decreased $4.7 million.

•

Net loss was $3.2 million for the three months ended March 31, 2012, as compared to a net loss of less than $0.1 million for
2011. On a constant currency basis, the net loss increased $3.1 million.

- 22 -

Constant Currency

The Company operates on a global basis,
with the majority of its gross margin generated outside of the U.S. Accordingly, fluctuations in foreign currency exchange rates
can affect our results of operations. For the discussion of reportable segment results of operations, the Company uses constant
currency information. Constant currency compares financial results between periods as if exchange rates had remained constant period-over-period.
The Company defines the term “constant currency” to mean that financial data for a previously reported period are translated
into U.S. dollars using the same foreign currency exchange rates that were used to translate financial data for the current period.
The Company’s management reviews and analyzes business results in constant currency and believes these results better represent
the Company’s underlying business trends. Changes in foreign currency exchange rates generally impact only reported earnings.

Changes in revenue, gross margin, SG&A
and Non-Op, business reorganization expenses, operating income (loss), net income (loss) and EBITDA (loss) include the effect of
changes in foreign currency exchange rates.

The tables below summarize the impact of
foreign currency exchange adjustments on the Company’s operating results for the three months ended March 31, 2012 and 2011.

Three Months Ended March 31,

2012

2011

$ in thousands

As reported

As reported

Currency translation

Constant currency

Revenue:

Hudson Americas

$

45,170

$

45,812

$

(7

)

$

45,805

Hudson Asia Pacific

74,263

79,017

4,053

83,070

Hudson Europe

81,157

93,710

(2,472

)

91,238

Total

$

200,590

$

218,539

$

1,574

$

220,113

Gross margin:

Hudson Americas

$

11,831

$

10,356

$

(6

)

$

10,350

Hudson Asia Pacific

29,313

31,905

1,472

33,377

Hudson Europe

32,064

38,937

(1,208

)

37,729

Total

$

73,208

$

81,198

$

258

$

81,456

SG&A and other non-Op (a):

Hudson Americas

$

12,299

$

10,733

$

(7

)

$

10,726

Hudson Asia Pacific

29,233

29,888

1,413

31,301

Hudson Europe

32,438

36,415

(1,144

)

35,271

Corporate

499

1,285

-

1,285

Total

$

74,469

$

78,321

$

262

$

78,583

Business reorganization expenses:

Hudson Americas

$

20

$

-

$

-

$

-

Hudson Asia Pacific

67

-

-

-

Hudson Europe

720

351

(8

)

343

Corporate

133

-

-

-

Total

$

940

$

351

$

(8

)

$

343

Operating income (loss):

Hudson Americas

$

(64

)

$

(118

)

$

-

$

(118

)

Hudson Asia Pacific

1,045

2,432

108

2,540

Hudson Europe

333

3,319

(113

)

3,206

Corporate

(5,016

)

(5,170

)

-

(5,170

)

Total

$

(3,702

)

$

463

$

(5

)

$

458

Net income (loss), consolidated

$

(3,211

)

$

(6

)

$

(70

)

$

(76

)

EBITDA (loss):

Hudson Americas

$

(491

)

$

(379

)

$

(1

)

$

(380

)

Hudson Asia Pacific

8

2,014

59

2,073

Hudson Europe

(1,087

)

2,175

(55

)

2,120

Corporate

(631

)

(1,284

)

-

(1,284

)

Total

$

(2,201

)

$

2,526

$

3

$

2,529

(a)

SG&A and Non-Op is a measure that the management uses to evaluate the segments’ expenses, which include the following
captions on the Condensed Consolidated Statements of Operations: Selling, general and administrative expenses and other income
(expense), net. Corporate management service allocations are included in the segments’
other income (expense).

(b)

See EBITDA reconciliation in the following section.

- 23 -

Use of EBITDA (Non-GAAP measure)

Management believes EBITDA is a meaningful
indicator of the Company’s performance that provides useful information to investors regarding the Company’s financial
condition and results of operations. EBITDA is also considered by management as the best
indicator of operating performance and most comparable measure across the regions in which we operate. Management also uses this
measurement to evaluate capital needs and working capital requirements. EBITDA should not be considered in isolation or as a substitute
for operating income, or net income prepared in accordance with generally accepted accounting principles in the United States
of America (“GAAP”) or as a measure of the Company’s profitability. EBITDA
is derived from net income (loss) adjusted for the provision for (benefit from) for income taxes, interest expense (income), and
depreciation and amortization.

The
reconciliation of EBITDA to the most directly comparable GAAP financial measure is provided in the table below:

Three Months Ended March 31,

$ in thousands

2012

2011

Net income (loss)

$

(3,221

)

$

(6

)

Adjustments to net income (loss)

Provision for (benefit from) income taxes

(646

)

750

Interest expense, net

161

206

Depreciation and amortization expense

1,505

1,576

Total adjustments from income (loss) to EBITDA (loss)

1,020

2,532

EBITDA (loss)

$

(2,201

)

$

2,526

Temporary
Contracting Data

The following table sets forth the Company’s
temporary contracting revenue, temporary contracting gross margin, and gross margin as a percent of revenue for the three months
ended March 31, 2012 and 2011.

Temporary contracting gross margin and gross margin as a percent of revenue are shown to provide additional information on
the Company’s ability to manage its cost structure and provide further comparability relative to the Company’s peers.
Temporary contracting gross margin is derived by deducting the direct costs of temporary contracting from temporary contracting
revenue. The Company’s calculation of gross margin may differ from those of other companies.

- 24 -

Results of Operations

Hudson
Americas (reported currency)

Revenue

Three Months Ended March 31,

2012

2011

$ in millions

As reported

As reported

Hudson Americas

Revenue

$

45.2

$

45.8

Revenue
remained essentially flat at $45.2 million for the three months ended March 31, 2012, as compared to $45.8 million for 2011. Permanent
recruitment revenue more than doubled with an increase of $1.8 million and was offset by a decrease in contracting revenue of $2.5
million, or 5.6%, as compared to 2011.

RPO accounted for nearly all the growth
in permanent recruitment revenue and was driven by new client wins and achievement of incentive thresholds with existing clients.
The decline in contracting revenue was principally in legal and resulted principally from the workflow gaps in large projects.

Gross margin

Three Months Ended March 31,

2012

2011

$ in millions

As reported

As reported

Hudson Americas

Gross margin

$

11.8

$

10.4

Gross margin as a percentage of revenue

26.2

%

22.6

%

Contracting gross margin as a percentage of contracting revenue:

20.1

%

19.6

%

Gross
margin was $11.8 million for the three months ended March 31, 2012, as compared to $10.4 million for 2011, an increase of $1.5
million or 14.2%. The increase in gross margin was entirely attributable to permanent recruitment, which increased $1.7 million,
or nearly double, and was partially offset by a slight decline in contracting gross margin.

The
increase in permanent recruitment gross margin was attributable to the same factors as described above for revenue.

Contracting
gross margin as a percentage of revenue was 20.1% for the three months ended March 31, 2012, as compared to 19.6% for 2011 and
due principally to mix. Total gross margin as a percentage of revenue increased to 26.2% from 22.6% in 2011 as a result
of the higher growth in RPO as described above.

Selling, general and administrative expenses and non-operating
income (expenses) (“SG&A and Non-Op”)

Three Months Ended March 31,

2012

2011

$ in millions

As reported

As reported

Hudson Americas

SG&A and Non-Op

$

12.3

$

10.7

SG&A and Non-Op as a percentage of revenue

27.2

%

23.4

%

SG&A
and Non-Op was $12.3 million for the three months ended March 31, 2012 as compared to $10.7 million
for 2011, an increase of $1.6 million or 14.6%. The
increase was primarily due to proportionally greater staff compensation resulting from the higher gross margin and an increase
in professional fees. SG&A and Non-Op, as a percentage of revenue, was 27.2% as compared to 23.4% for 2011
due to higher corporate management and professional fees.

- 25 -

Operating Income and EBITDA

Three Months Ended March 31,

2012

2011

$ in millions

As reported

As reported

Hudson Americas

Operating income (loss):

$

(0.1

)

$

(0.1

)

EBITDA (loss)

$

(0.5

)

$

(0.4

)

EBITDA (loss) as a percentage of revenue

-1.1

%

-0.8

%

EBITDA
loss remained flat at $0.5 million for the three months ended March 31, 2012, as compared to an EBITDA loss of $0.4 million for
2011. EBITDA loss, as a percentage of revenue, also remained essentially flat at 1.1% as compared to 0.8% for 2011. Operating
loss was flat at $0.1 million for the three months ended March 31, 2012 and 2011.
The difference between operating loss and EBITDA loss was principally due to corporate
management fees and depreciation.

Hudson
Asia Pacific (constant currency)

Revenue

Three Months Ended March 31,

2012

2011

$ in millions

As reported

As reported

Constant currency

Hudson Asia Pacific

Revenue

$

74.3

$

79.0

$

83.1

Revenue
was $74.3 million for the three months ended March 31, 2012, as compared to $83.1 million for 2011, a decrease of $8.8 million
or 10.6%. Contracting and permanent recruitment revenue decreased $5.5 million and $4.0 million, or 9.6% and 17.6%, respectively
and was partially offset by outplacement revenue, which increased $0.9 million or 32.3%.

In
Australia, contracting and permanent recruitment revenue declined $4.4 million and $3.1 million, or 9.0% and 23.2%, respectively.The decline in contracting revenue was attributed principally to a change in the business
model with one low margin client and a slowing in spending in the public sector. The decrease in permanent recruitment revenue
was due principally to clients postponing hiring decisions. In Asia, revenue declined slightly from $8.4 million to $7.9 million,
or 6.4%, principally due to the banking sector, which remained weak across the region.

Gross margin

Three Months Ended March 31,

2012

2011

$ in millions

As reported

As reported

Constant currency

Hudson Asia Pacific

Gross margin

$

29.3

$

31.9

$

33.4

Gross margin as a percentage of revenue

39.5

%

40.4

%

40.2

%

Contracting gross margin as a percentage of contracting revenue:

15.6

%

15.3

%

15.3

%

Gross
margin was $29.3 million for the three months ended March 31, 2012, as compared to $33.4 million for 2011, a decrease of $4.1 million
or 12.2%. Permanent recruitment and contracting gross margins decreased $3.9 million and $0.7 million or 17.6% and 7.8%, respectively.
The decrease was partially offset by an improvement in talent management, which increased $0.7 million, or 30.7%.

The
decrease in permanent recruitment and contracting gross margin was attributable to the same factors as described above for revenue.

Contracting
gross margin as a percentage of revenue was 15.6% for the three months ended March 31, 2012, as compared to 15.3% for 2011. Total
gross margin, as a percentage of revenue, was 39.5% compared to 40.2% for 2011
and resulted principally from the change in mix.

- 26 -

SG&A and Non-Op

Three Months Ended March 31,

2012

2011

$ in millions

As reported

As reported

Constant currency

Hudson Asia Pacific

SG&A and Non-Op

$

29.2

$

29.9

$

31.3

SG&A and Non-Op as a percenatge of revenue

39.4

%

37.8

%

37.7

%

SG&A
and Non-Op was $29.2 million for the three months ended March 31, 2012 as compared to $31.3 million
for 2011, a decrease of $2.1 million or 6.6%. The
decrease was primarily attributed to proportionally lower compensation, which declined $2.7 million or 13.6% resulting
from lower gross margin, partially offset by $0.3 million of
costs associated with relocation of the new Sydney, Australia office. SG&A and Non-Op, as a percentage of revenue, was 39.4%
as compared to 37.7% for 2011 primarily
due to the increased corporate management fee allocation and the relocation costs noted above.

Operating Income and EBITDA

Three Months Ended March 31,

2012

2011

$ in millions

As
reported

As
reported

Constant currency

Hudson Asia Pacific

Operating income (loss):

$

1.0

$

2.4

$

2.5

EBITDA (loss)

$

0.0

$

2.0

$

2.1

EBITDA (loss) as a percentage of revenue

0.0

%

2.5

%

2.6

%

EBITDA
was breakeven for the three months ended March 31, 2012, as compared to $2.1 million for 2011, a decrease of $2.1
million. EBITDA, as a percentage of revenue, was 0% as compared to 2.6% for 2011. The decrease in EBITDA was primarily a result
of lower gross margin. Operating income was $1 million for the three months ended
March 31, 2012, as compared to $2.5 million for 2011. The difference between
operating income and EBITDA was principally due to corporate management fee and depreciation.

- 27 -

Hudson
Europe (constant currency)

Revenue

Three Months Ended March 31,

2012

2011

$ in millions

As
reported

As
reported

Constant currency

Hudson Europe

Revenue

$

81.2

$

93.7

$

91.2

Revenue
was $81.2 million for the three months ended March 31, 2012, as compared to $91.2 million for 2011, a decrease of $10.1 million
or 11.0%. Contracting and permanent recruitment revenue decreased $6.1 million, $3.7 million, or 9.7% and 19.4%, respectively.
Talent management revenue remained flat at approximately $8.0 million in 2012 and 2011.

In
the U.K., contracting and permanent recruitment revenue declined $8.7 million and $2.0 million, or 16.6% and 22.1%, respectively
and resulted principally from continued weakness in the financial services sector.

In Continental
Europe, revenue increased $0.8 million or 2.7%. Contracting revenue increased $2.6 million or 24.4%, partially offset by a decrease
in permanent recruitment revenue of $1.5 million, or 15.1%. Talent management revenue was
relatively flat as compared to 2011. Our consultative practices in the Netherlands and Belgium accounted for the vast majority
of the increase in contracting revenue. The decline in permanent recruitment revenue occurred principally in France resulting from
lower spending in our RPO practices.

Gross margin

Three Months Ended March 31,

2012

2011

$ in millions

As
reported

As
reported

Constant currency

Hudson Europe

Gross margin

$

32.1

$

38.9

$

37.7

Gross margin as a percentage of revenue

39.5

%

41.6

%

41.4

%

Contracting gross margin as a percentage of contracting revenue:

17.4

%

18.5

%

18.5

%

Gross
margin was $32.1 million for the three months ended March 31, 2012, as compared to $37.7 million for 2011, a decrease of $5.7 million
or 15.0%. Permanent recruitment and contracting gross margins decreased $3.5 million and $1.8 million, or 19.1% and 15.1%, respectively.
Talent management gross margin remained flat at approximately $7.0 million in 2012
and 2011.

In
the U.K., contracting and permanent recruitment gross margin declined $2.2 million and $1.9 million, or 23.8% and 21.9%, respectively
and was attributable to the same factors as described above for revenue.

In Continental Europe, total gross
margin decreased $1.3 million or 7.0%. Permanent recruitment gross margin decreased $1.4 million or 14.6% and was partially offset
by the increase in contracting gross margin of $0.4 million, or 15.1%. The
changes in permanent recruitment and contracting gross margin were attributable to the same factors as described above for revenue.

Contracting
gross margin as a percentage of contracting revenue was 17.4% for the three months ended March 31, 2012, as compared to 18.5%
for 2011 and was attributable to the change in mix among the practices. Total gross margin, as a percentage of total revenue, was
39.5% as compared to 41.4% for 2011 and
was primarily related to the decline in permanent recruitment gross margin.

- 28 -

SG&A and Non-Op

Three Months Ended March 31,

2012

2011

$ in millions

As reported

As reported

Constant currency

Hudson Europe

SG&A and Non-Op

$

32.4

$

36.4

$

35.3

SG&A and Non-Op as a percentage of revenue

40.0

%

38.9

%

38.7

%

SG&A
and Non-Op was $32.4 million for the three months ended March 31, 2012, as compared to $35.3 million
for the 2011, a decrease of $2.8 million or 8.0%. The decrease was primarily due to lower consultant compensation resulting from
decline in gross margin. SG&A and Non-Op, as a percentage of revenue, was 40.0% as compared to 38.7% for 2011. The
change was primarily due to the weaker revenue.

Business reorganization expenses
were $0.7 million for the three months ended March 31, 2012, as compared to $0.3 million for
the same period in 2011 and were attributed to employee termination benefits.

Operating Income and EBITDA

Three Months Ended March 31,

2012

2011

$ in millions

As reported

As reported

Constant currency

Hudson Europe

Operating income (loss):

$

0.3

$

3.3

$

3.2

EBITDA (loss)

$

(1.1

)

$

2.2

$

2.1

EBITDA (loss) as a percenatge of revenue

-1.3

%

2.3

%

2.3

%

EBITDA
loss was $1.1 million for the three months ended March 31, 2012, as compared to EBITDA of $2.1 million for 2011, a decrease of
$3.2 million. The decrease in EBITDA was primarily from lower gross margin. EBITDA loss, as a percentage of revenue, was 1.3% as
compared to EBITDA margin of 2.3% for 2011.

Operating income was $0.3 million for the
three months ended March 31, 2012, as compared to $3.2 million for 2011, a decrease
of $2.9 million. The difference between operating income and EBITDA and EBITDA loss
is principally due to corporate management fee and depreciation.

The
following are discussed in reported currency

Corporate
and Other

Corporate expenses were $0.5 million
for the three months ended March 31, 2012, as compared to $1.3 million for 2011, a
decrease of $0.8 million or 61.1%. The decrease was primarily due to lower compensation
expense, and decreased professional fees. Corporate EBITDA loss was $0.6 million for the three
months ended March 31, 2012, as compared to an EBITDA loss of $1.3 million for 2011, a decrease of $0.7 million.
The decrease in EBITDA loss was primarily due to the factors discussed above.

Depreciation and
Amortization Expense

Depreciation
and amortization expense remained consistent at $1.5 million for the three months
ended March 31, 2012, as compared to $1.6 million for 2011.

Interest
Expense

Interest expense,
net of interest income remained consistent at $0.2 million for the three
months ended March 31, 2012 and 2011.

- 29 -

Provision for (Benefit
from) Income Taxes

The benefit from income taxes for the three
months ended March 31, 2012 was $0.6 million on $3.9 million of pre-tax loss, as compared to a provision for income taxes
of $0.7 million on $0.7 million of pre-tax income in 2011. The effective tax rate for the three
months ended March 31, 2012 was 16.7%, as compared to 100.8% for 2011. The change in the Company’s effective tax rate
for the three months ended March 31, 2012 as compared to 2011 was
primarily attributable to the Company’s ability to benefit losses in certain foreign jurisdictions in 2012 that it was previously
unable to recognize and also from the lower charges related to uncertain tax positions. The effective tax rate differed
from the U.S. federal statutory rate of 35% primarily due to the utilization of U.S. net operating losses, partially offset by
the inability to recognize tax benefits on net losses in certain foreign jurisdictions, state taxes, non-deductible expenses and
foreign tax rates that vary from that in the U.S.

Net Income (Loss)

Net loss was $3.2 million for the
three months ended March 31, 2012, as compared to a net loss of less than $0.1 million
for 2011, an increase in net loss of $3.2 million. Basic and diluted loss per share were $0.1 for the three
months ended March 31, 2012, as compared to basic and diluted loss per share of $0.00 for 2011.

Liquidity and Capital Resources

As of March 31, 2012, cash and cash equivalents
totaled $24.9 million. The following table summarizes the cash flow activities for the three months ended March 31, 2012 and 2011:

For The Three Months Ended March 31,

(In millions)

2012

2011

Net cash provided by (used in) operating activities

$

(7.2

)

$

(10.1

)

Net cash provided by (used in) investing activities

(1.8

)

(0.8

)

Net cash provided by (used in) financing activities

(3.9

)

9.3

Effect of exchange rates on cash and cash equivalents

0.6

0.4

Net increase (decrease) in cash and cash equivalents

$

(12.3

)

$

(1.2

)

Cash Flows from Operating Activities

For three
months ended March 31, 2012, net cash used in operating activities was $7.2 million compared
to $10.1 million for the same period in 2011, a decrease of $2.9 million. The improvement was primarily due to accelerated
accounts receivable collection in the current period and the return of a security deposit of $1.8 million
related to an office lease in Australia, partially
offset by higher bonus compensation as a result of improved financial performance in fiscal 2011.

Cash
Flows from Investing Activities

For the three months ended March 31, 2012,
net cash used in investing activities was $1.8 million compared to $0.8 million for the same period in 2011, an increase of $1.0
million. The increase was primarily for capital expenditures of software in 2012.

Cash Flows from Financing Activities

For the three months ended March 31, 2012,
net cash used in financing activities was $3.9 million compared to net cash provided by financing activities of $9.3 million for
the same period in 2011, an increase in the use of cash of $13.2 million. The increase in the use of cash was primarily for repayments
under the Company’s credit agreements.

- 30 -

Credit Agreements

Credit Agreement with RBS Citizens Business
Capital

On August 5, 2010, the Company and certain
of its North American and U.K. subsidiaries entered into a senior secured revolving credit facility with RBS Citizens Business
Capital, a division of RBS Asset Finance, Inc. (“RBS”), and on February 22, 2012, the Company and certain of its North
American and U.K. subsidiaries entered into an amendment to the senior secured revolving credit facility with RBS (as amended,
the “Revolver Agreement”). The Revolver Agreement provides the Company with the ability to borrow up to $40 million,
including the issuance of letters of credit. The Company may increase the maximum borrowing amount to $50 million, subject to certain
conditions including lender acceptance. Extensions of credit are based on a percentage of the eligible accounts receivable from
the U.K. and North America operations, less required reserves. In connection with the Revolver Agreement, the Company incurred
and capitalized approximately $1.5 million of deferred financing costs, which are being amortized over the term of the agreement.
The maturity date of the Revolver Agreement is August 5, 2014. Borrowings under the Revolver Agreement are secured by substantially
all of the assets of the Company.

Prior to the amendment, borrowings could
be made with an interest rate based on a base rate plus 2% or on the LIBOR rate for the applicable period plus 3%. The applicable
margin for each rate is based on the Company’s Fixed Charge Coverage Ratio (as defined in the Revolver Agreement). The amendment,
which was deemed to be effective on February 1, 2012, lowered the applicable margin for the interest rate on borrowings based on
the Company’s Fixed Charge Coverage Ratio as follows:

Level

Fixed Charge Coverage Ratio

Base RateRevolving Loans

LIBOR RevolvingLoans or Letter ofCredit Obligations

I

Greater than or equal to 1.25:1.0

1.25

%

2.25

%

II

Less than 1.25:1.0 but greater than or equal to 1.10:1.0

1.50

%

2.50

%

III

Less than 1.10:1.0

1.75

%

2.75

%

The details of the Revolver Agreement as
of March 31, 2012 were as follows:

March 31,

(In millions)

2012

Borrowing base

$

34.6

Less: adjustments to the borrrowing base

Minimum availability

(5.0

)

Outstanding letters of credits

(2.4

)

Adjusted borrowing base

27.3

Less: outstanding borrowing

-

Additional borrowing availability

$

27.3

Interest rates on outstanding borrowing

4.50

%

The Revolver
Agreement contains various restrictions and covenants including: (1) a requirement to maintain
a minimum excess availability of $5 million, a Fixed Charge Coverage Ratio of at least 1.1x and EBITDA (as defined in the Revolver
Agreement) for the Company’s North American and U.K. operations of at least $1 million; (2) a limit on the payment of dividends
of not more than $5 million per year and subject to certain conditions; (3) restrictions on the ability of the Company to make
additional borrowings, acquire, merge or otherwise fundamentally change the ownership of the Company or repurchase the Company’s
stock; (4) a limit on investments, and a limit on acquisitions of not more than $25 million in cash and $25 million in non-cash
consideration per year, subject to certain conditions set forth in the Revolver Agreement; and (5) a limit on dispositions of assets
of not more than $4 million per year. The Company was in compliance with all covenants under the Revolver Agreement as of March
31, 2012.

- 31 -

Credit Agreement with Westpac Banking
Corporation

On November 29, 2011, certain Australian
and New Zealand subsidiaries of the Company entered into a Facility Agreement, dated November 29, 2011 (the “Facility Agreement”),
with Westpac Banking Corporation and Westpac New Zealand Limited (collectively, “Westpac”).

The Facility Agreement provides three tranches: (a) an invoice
discounting facility of up to $20.7 million (AUD20 million) (“Tranche A”) for an Australian subsidiary of the Company,
which is based on an agreed percentage of eligible accounts receivable; (b) an overdraft facility of up to $2.9 million (NZD3.5
million) (“Tranche B”) for a New Zealand subsidiary of the Company; and (c) a financial guarantee facility of up to
$5.2 million (AUD5 million) (“Tranche C”) for the Australian subsidiary.

The Facility Agreement does not have a
stated maturity date and can be terminated by Westpac upon 90 days written notice. Borrowings under Tranche A may be made with
an interest rate based on the Invoice Finance 30-day Bank Bill Rate (as defined in the Facility Agreement) plus a margin of 0.75%.
Borrowings under Tranche B may be made with an interest rate based on the Commercial Lending Rate (as defined in the Facility Agreement)
plus a margin of 0.83%. Each of Tranche A and Tranche B bears a fee, payable monthly, equal to 0.65% of the size of Westpac’s
commitment under such tranche. Borrowings under Tranche C may be made incurring a fee equal to 1.10% of the face value of the financial
guarantee requested. Amounts owing under the Facility Agreement are secured by substantially all of the assets of the Australian
subsidiary, its Australian parent company and the New Zealand subsidiary (collectively, the “Obligors”) and certain
of their subsidiaries.

The details of the Facility Agreement as
of March 31, 2012 were as follows:

March 31,

(In millions)

2012

Tranche A:

Borrowing capacity

$

20.7

Less: outstanding borrowing

-

Additional borrowing availability

$

20.7

Interest rates on outstanding borrowing

6.15

%

Tranche B:

Borrowing capacity

$

2.9

Less: outstanding borrowing

-

Additional borrowing availability

$

2.9

Interest rates on outstanding borrowing

6.03

%

Tranche C:

Borrowing capacity

$

5.2

Less: outstanding borrowing

(4.5

)

Additional borrowing availability

$

0.7

Interest rates on outstanding borrowing

1.10

%

The Facility Agreement contains various
restrictions and covenants applicable to the Obligors and certain of their subsidiaries, including (a) a requirement that the Obligors
maintain (1) a minimum Tangible Net Worth (as defined in the Facility Agreement) as of the last day of each calendar quarter of
not less than the higher of 85% of the Tangible Net Worth as of the last day of the previous calendar year and $18.1 million (AUD17.5
million); (2) at all times, a minimum Fixed Charge Coverage Ratio (as defined in the Facility Agreement) of 1.5x for the trailing
twelve month period; and (3) a maximum Borrowing Base Ratio (as defined in the Facility Agreement) as of the last day of each calendar
quarter of not more than 0.8; and (b) a limitation on certain intercompany payments with permitted payments outside the Obligor
group restricted to a defined amount derived from the net profits of the Obligors and their subsidiaries.
The Company was in compliance with all covenants under the Facility Agreement as of March 31,
2012.

- 32 -

Other Credit Agreements

The Company also has lending arrangements
with local banks through its subsidiaries in the Netherlands, Belgium, Singapore and Mainland China. As of March 31, 2012, the
Netherlands subsidiary could borrow up to $2.1 million (€1.5 million) based on an agreed percentage of accounts receivable
related to its operations. In May 2011, the Belgium has a $1.3 million (€1 million) overdraft facility. Borrowings under the
Belgium and the Netherlands lending arrangements may be made with an interest rate based on the one month EURIBOR plus a margin,
and were 3.06% as of March 31, 2012. The lending arrangement in the Netherlands expires annually each June, but can be renewed
for one year periods at that time. The lending arrangement in Belgium has no expiration date and can be terminated with a 15 day
notice period. In Singapore, the Company’s subsidiary can borrow up to $0.8 million (SGD 1 million) for working capital purposes.
Interest on borrowings under this overdraft facility is based on the Singapore Prime Rate plus 1.75%, and it was 6.0% on March
31, 2012. The Singapore overdraft facility expires annually each August, but can be renewed for one year periods at that time.
In Mainland China, the Company’s subsidiary can borrow up to $1 million for working capital purposes. Interest on borrowings
under this overdraft facility is based on the People’s Republic of China’s six month rate plus 200 basis points, and
it was 8.1% on March 31, 2012. This overdraft facility expires annually each September, but can be renewed for one year periods
at that time. There were no outstanding borrowings under the Belgium, the Netherlands, Singapore and Mainland China lending agreements
as of March 31, 2012.

The average
monthly outstanding borrowings for the Revolver Agreement, Facility Agreement and the various credit agreements in Belgium, the
Netherlands, Singapore and Mainland China was $1.3 million for the three months ended March 31, 2012.
The weighted average interest rate on all outstanding borrowings for the three months ended March
31, 2012 was 5.92%.

The Company continues to use the aforementioned
credit to support its ongoing global working capital requirements, capital expenditures and other corporate purposes and to support
letters of credit. Letters of credit and bank guarantees are used primarily to support office leases.

Shelf Registration and Stock
Issuance

In December 2009, the Company filed a shelf
registration statement (the “2009 Shelf Registration”) with the Securities and Exchange Commission (“SEC”)
to enable it to issue up to $30.0 million equivalent of securities or combinations of securities. The types of securities permitted
for issuance under the 2009 Shelf Registration are debt securities, common stock, preferred stock, warrants, stock purchase contracts
and stock purchase units.

As a result
of a 2010 public offering of common stock, the Company may issue up to $9 million equivalent of securities or combinations
of securities under the 2009 Shelf Registration.

Liquidity Outlook

As of March
31, 2012, the Company had cash and cash equivalents on hand of $24.9 million supplemented by additional borrowing availability
of $56.1 million under the Revolver Agreement, the
Facility Agreement and other lending arrangements in Belgium, the Netherlands, New Zealand, Singapore
and Mainland China. The Company believes that it has sufficient liquidity to satisfy its needs through at least the next 12 months,
based on the Company’s total liquidity as of March 31, 2012. The Company’s near-term cash requirements during
2012 are primarily related to funding operations and capital expenditures. In 2012, the Company expects to make capital expenditures
of approximately $7.0 million to $9.0 million. The Company is closely managing its capital spending and will perform capital additions
where economically prudent, while continuing to invest strategically for future growth.

As of March
31, 2012, $3.1 million of the Company’s cash and cash equivalents noted above was held in the United States and the
remainder was held internationally, primarily in the United Kingdom for $9.1 million, Mainland China for $3.9 million, and Belgium
for $1.4 million. The majority of the Company’s offshore cash is available to it as a source of funds, net of any tax obligations
or assessments.

Unrepatriated cumulative earnings of certain
foreign subsidiaries are considered to be invested indefinitely outside the United States except where the Company is able to repatriate
these earnings to the United States without a material incremental tax provision. In managing its day-to-day liquidity and
its capital structure, the Company does not rely on the unrepatriated earnings as a source of funds. The Company has not
provided for federal income or foreign withholding taxes on these undistributed foreign earnings. The Company has not done
so because this situation is unlikely to occur in the foreseeable future. Accordingly, it is not practicable to determine the amount
of tax associated with such undistributed earnings.

- 33 -

For the three months ended March 31, 2012,
the concern about the strength and sustainability of the economic recovery and the solvency of certain European sovereign nations
has continued to negatively impact the markets where the Company operates. The Company believes that future external market conditions
remain uncertain, particularly the access to credit, rates of near-term projected economic growth and levels of unemployment in
the markets in which it operates. Due to these uncertain external market conditions, the Company cannot provide assurance that
its actual cash requirements will not be greater in the future than those currently expected, especially if market conditions deteriorate
substantially. If sources of liquidity are not available or if the Company cannot generate sufficient cash flow from operations,
the Company could be required to obtain additional sources of funds through additional operating improvements, capital market transactions,
asset sales or financing from third parties, or a combination of those sources. The Company cannot provide assurance that these
additional sources of funds will be available or, if available, would have reasonable terms.

Contingencies

From
time to time in the ordinary course of business, the Company is subject to compliance audits by federal, state, local and foreign
government regulatory, tax, and other authorities relating to a variety of regulations, including wage and hour laws, unemployment
taxes, workers’ compensation, immigration, and income, value-added and sales taxes. The Company is also subject to, from
time to time in the ordinary course of business, various claims, lawsuits, and other complaints from, for example, clients, candidates,
suppliers, landlords for both leased and subleased properties, and former and current employees. Periodic events and management
actions can change the number and type of audits, claims, lawsuits or complaints asserted against the Company. Events can also
change the likelihood of assertion and the behavior of third parties to reach resolution regarding such matters.

The
economic circumstances in the recent past have given rise to many news reports and bulletins from clients, tax authorities and
other parties about changes in their procedures for audits, payment, plans to challenge existing contracts and other such matters
aimed at being more aggressive in the resolution of such matters in their own favor. The Company believes that it has appropriate
procedures in place for identifying and communicating any matters of this type, whether asserted or likely to be asserted, and
it evaluates its liabilities in light of the prevailing circumstances. Changes in the behavior of third parties could cause the
Company to change its view of the likelihood of a claim and what might constitute a trend. In the last twelve months, the Company
has not seen a marked difference in employee or client disputes.

For
matters that have reached the threshold of probable and estimable, the Company has established reserves for legal, regulatory and
other contingent liabilities. The Company’s reserves were not significant as of March 31, 2012. Although the outcome of these
matters cannot be determined, the Company believes that none of the currently pending matters, individually or in the aggregate,
will have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

The
Company is currently appealing a decision by the Pennsylvania Department of Revenue related to its 2004 and 2005 state income tax
returns. Under the appeals process, the State has filed a routine tax lien in the amount of $3.5 million on the Company’s
U.S. operating subsidiary. The Company has posted a security bond amounting to 120% of the lien. The Company does not expect
this bond to be drawn. In January 2012, the Company and the Commonwealth of Pennsylvania engaged in discussions resulting in a
settlement proposal that is currently pending. This proposal could potentially lead to a settlement within the next twelve months.
A settlement could result in a reduction in the future provision for income taxes. Management believes its reserves for this matter
are adequate.

- 34 -

Recent Accounting Pronouncements

In June 2011, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2011-05, “Comprehensive
Income (Topic 220): Presentation of Comprehensive Income”. This standard requires an entity to present the total of comprehensive
income, the components of net income, and the components of other comprehensive income either in a single continuous statement
of comprehensive income or in two separate but consecutive statements. This standard does not change the items that must be reported
in other comprehensive income, how such items are measured or when they must be reclassified to net income. Additionally, the standard
does not affect the calculation or reporting of net income and earnings per share. In December 2011, the FASB issued ASU 2011-12
“Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications
of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05”. ASU 2011-12 deferred
certain aspects of ASU 2011-05. Among the new provisions in ASU 2011-05 was a requirement for entities to present reclassification
adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and
the other comprehensive income is presented. This requirement is indefinitely deferred by ASU 2011-12 and will be further deliberated
by the FASB at a future date.The standard is effective for interim
and annual periods beginning after December 15, 2011 and should be applied retrospectively. The Company
adopted ASU 2011-05 as of January 1, 2012, and presented the components of other comprehensive income in a single continuous
Condensed Consolidated Statement of Operations and Other Comprehensive Income (loss). The Company’s
adoption of ASU 2011-05 did not have any impact on the Company’s results of operations or financial condition

Critical Accounting Policies

See “Critical Accounting Policies”
under Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed with
the SEC on February 28, 2012 and incorporated by reference herein. There were no changes to the Company’s critical accounting
policies during the three months ended March 31, 2012.

- 35 -

FORWARD-LOOKING STATEMENTS

This Form 10-Q
contains statements that the Company believes to be “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Form 10-Q, including
statements regarding the Company’s future financial condition, results of operations, business operations and business prospects,
are forward-looking statements. Words such as “anticipate,” “estimate,” “expect,” “project,”
“intend,” “plan,” “predict,” “believe” and similar words, expressions and variations
of these words and expressions are intended to identify forward-looking statements. All forward-looking statements are subject
to important factors, risks, uncertainties and assumptions, including industry and economic conditions that could cause actual
results to differ materially from those described in the forward-looking statements. Such factors, risks, uncertainties and assumptions
include, but are not limited to, (1) global economic fluctuations, (2) risks related to fluctuations in the Company’s operating
results from quarter to quarter, (3) the ability of clients to terminate their relationship with the Company at any time, (4) competition
in the Company’s markets, (5) risks associated with the Company’s investment strategy, (6) risks related to international
operations, including foreign currency fluctuations, (7) the Company’s dependence on key management personnel, (8) the Company’s
ability to attract and retain highly skilled professionals, (9) the Company’s ability to collect its accounts receivable,
(10) the Company’s history of negative cash flows and operating losses may reoccur in the future, (11) restrictions on the
Company’s operating flexibility due to the terms of its credit facilities, (12) the Company’s ability to achieve anticipated
cost savings through the Company’s cost reduction initiatives, (13) the Company’s heavy reliance on information systems
and the impact of potentially losing or failing to develop technology, (14) risks related to providing uninterrupted service to
clients, (15) the Company’s exposure to employment-related claims from clients, employers and regulatory authorities and
limits on related insurance coverage, (16) the Company’s ability to utilize net operating loss carry-forwards, (17)
volatility of the Company’s stock price, (18) the impact of government regulations, and (19) restrictions imposed by blocking
arrangements. These forward-looking statements speak only as of the date of this Form 10-Q. The Company assumes no obligation,
and expressly disclaims any obligation, to update any forward-looking statements, whether as a result of new information, future
events or otherwise.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company
conducts operations in various countries and faces both translation and transaction risks related to foreign currency exchange.
For the three months ended March 31, 2012, the Company earned approximately 85% of
its gross margin outside the United States (“U.S.”), and it collected payments in local currency and paid related operating
expenses in such corresponding local currency. Revenues and expenses in foreign currencies translate into higher or lower revenues
and expenses in U.S. dollars as the U.S. dollar weakens or strengthens against other currencies. Therefore, changes in exchange
rates may affect our consolidated revenues and expenses (as expressed in U.S. dollars) from foreign operations.

Amounts invested in our foreign operations
are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting translation adjustments
are recorded as a component of accumulated other comprehensive income in the stockholders’ equity section of the Condensed
Consolidated Balance Sheets. The translation of the foreign currency into U.S. dollars is reflected as a component of stockholders’
equity and does not impact our operating results.

As more fully
described in Item 2 “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”, the Company has credit agreements with RBS Citizens
Business Capital, Westpac Banking Corporation and other credit agreements with lenders in Belgium, the
Netherlands, New Zealand, Singapore and Mainland China. The Company does not hedge the interest risk on borrowings under the credit
agreements, and accordingly, it is exposed to interest rate risk on the borrowings under such credit agreements. Based on our annual
average borrowings, a 1% increase or decrease in interest rates on our borrowings would not have a material impact on our earnings.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the
participation of the Company’s Chairman and Chief Executive Officer and its Executive Vice President and Chief Financial
Officer, has conducted an evaluation of the design and operation of the Company’s disclosure controls and procedures, as
such term is defined under Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended. Based on this evaluation, the
Company’s Chairman and Chief Executive Officer and its Executive Vice President and Chief Financial Officer concluded that
the Company’s disclosure controls and procedures were effective as of March 31, 2012.

Changes in internal control over financial reporting

There were no changes in the Company’s
internal control over financial reporting that occurred during the three months ended March 31, 2012 that have materially affected,
or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

- 36 -

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

The Company is involved in various legal
proceedings that are incidental to the conduct of its business. The Company is not involved in any pending or threatened legal
proceedings that it believes could reasonably be expected to have a material adverse effect on its financial condition, or results
of operations.

ITEM 1A.

RISK FACTORS

As of March
31, 2012, there had not been any material changes to the information set forth in Item 1A. “Risk Factors” disclosed
in our Annual Report on Form 10-K for the year ended December 31, 2011.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes purchases
of common stock by the Company during the quarter ended March 31, 2012.

Approximate Dollar

Total Number of

Value of Shares

Shares Purchased as

that May Yet Be

Part of Publicly

Purchased Under

Total Number of

Average Price

Announced Plans

the Plans or

Period

Shares Purchased

Paid per Share

or Programs

Programs (a)

January 1, 2012 - January 31, 2012 (b)

420

$

4.95

-

$

6,792,000

February 1, 2012 - February 29, 2012 (b)

78,802

$

4.90

-

$

6,792,000

March 1, 2012 - March 31, 2012(b)

-

$

-

-

$

6,792,000

Total

79,222

$

4.90

-

$

6,792,000

(a)

On February 4, 2008, the Company announced that its Board of Directors authorized the repurchase of a maximum of $15 million of
the Company’s common stock. The Company has repurchased 1,491,772 shares for a total cost of approximately $8.2 million under
this authorization. Repurchases of common stock are restricted under the Company’s Revolver Agreement entered on August 5,
2010, as amended on February 22, 2012.

(b)

Consisted of restricted stock withheld from employees upon the vesting of such shares to satisfy employees’ income tax
withholding requirements.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

Costs Associated with Exit or
Disposal Activities - In January 2012, the
Company’s Chief Executive Officer approved a $1 million plan of reorganization (“2012 Plan”) to streamline
the Company’s support operations in each of Hudson’s regional businesses to match the aggregated operating
segments and to improve support services to the Company’s regional and global professional business practices. The plan
primarily includes costs for actions to reduce support functions to match them to the revised operating structure. On April
26, 2012, the Company’s Board of Directors approved an addition to the 2012 Plan of up to $10 million for additional actions to accelerate the Company’s plans for increased global alignment and
redirection of resources from support to client facing activities. The Company expects to substantially complete the 2012
Plan in 2012. The future cash expenditures for the actions described above are anticipated to be paid out primarily during
2012 and will be approximately equal to the estimated costs.

ITEM 6.

EXHIBITS

The exhibits to this Form 10-Q are listed
in the Exhibit Index included elsewhere herein.

- 37 -

SIGNATURES

Pursuant to the requirements of the Securities
and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.

HUDSON GLOBAL, INC.

(Registrant)

By:

/s/ MANUEL MARQUEZ DORSCH

Manuel MarquezDorsch

Chairman and Chief Executive Officer

(Principal Executive Officer)

Dated: May 2, 2012

By:

/s/ MARY JANE RAYMOND

Mary Jane Raymond

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Dated: May 2, 2012

- 38 -

HUDSON GLOBAL, INC.

FORM 10-Q

EXHIBIT INDEX

Exhibit

No.

Description

3.1

Amendment to Amended and Restated Certificate of Incorporation of Hudson Global, Inc.
(incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated May 1, 2012 (file No.
0-50129)).

3.2

Amended and Restated Certificate of Incorporation of Hudson Global, Inc. (incorporated by
reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K dated May 1, 2012 (file No. 0-50129)).

3.3

Amended and Restated By-laws of Hudson Global, Inc. (incorporated by reference to Exhibit
3.3 to the Company’s Current Report on Form 8-K dated May 1, 2012 (file No. 0-50129)).

10.1*

Hudson Global, Inc. 2009 Incentive Stock and Awards Plan, as Amended and Restated effective April 26, 2012 (incorporated by reference to Exhibit A to the Company’s definitive proxy statement filed with the Securities Exchange Commission on Schedule 14A on March 16, 2012 (file No. 0-50129)).

Certification of the Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

101

The following materials from Hudson Global, Inc’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 are furnished herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss)for the three months ended March 31, 2012 and 2011, (ii) the Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011, (iii) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011, (iv) the Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2012, and (v) Notes to Condensed Consolidated Financial Statements.